Search

Creating demonstrable value is the single most important objective of a Customer Success organization. Renewals, upsells, references all happen when you have a relationship based on value with your customers. While achieving that objective requires input and contributions from Marketing, Sales, Professional Services, and other parts of the company, the Customer Success function owns the primary responsibility. Some companies do an incredible job at delivering and proving value to their customer base; however many companies (some would argue most) are working to put a model and plan together to demonstrate value for their customers.

The steps I propose for getting there are, at a high-level, very straightforward:

Identify a Framework and Representative Behaviors for Each Phase

Identify Meaningful Quantitative Metrics

Perform a Benchmark

Create an Improvement Plan

Measure Against Plan, Provide Feedback, and Revise

Getting them right, however, is by no means easy. Each one of them takes thought, analysis of data, and iteration. The metrics and behaviors you need to identify are going to be unique to your space – and if identified well, will actually be unique to your company, so that you can measure value based on true differentiators that you offer.

So I offer these 5 steps not to make the process look easier than it is, but rather to provide some guidance as you take on your most important task as a company: continuing to earn your customers’ business.

Step 1: Identify a Multi-Phase Framework and Representative Behaviors for Each Phase

Every exercise needs an objective, and ideally a roadmap to get there. A framework provides your customers with a “bigger picture” view of the landscape and what they should be thinking about in order to be more effective at what they’re doing. Frameworks also give customers some perspective on where they fall with respect to industry leaders and laggards.

Figure 1: Example of Maturity/Effectiveness Model

One framework that works well is a Maturity (or “Effectiveness”) Model. These models generally consist of 5 (plus or minus 2) categories that represent different levels of maturity/proficiency/effectiveness in your space. In order to define these categories (or levels of maturity), identify behaviors that are characteristic of each of those levels and associate those behaviors with each level of proficiency/maturity as shown in Figure 1 above.

Customers can look at a framework like this and quickly conceptually grasp the types of behavior/activities necessary in order to advance along the model. As you develop this framework for your product and space, ideally try to map some of the behaviors that are associated with maturity levels to features of your product, so that you can easily associate customer usage of valuable features with their progress along the Maturity/Effectiveness Model.

Step 2: Identify Quantitative Metrics that Matter and Can Be Measured

In order to objectively measure progress on an ongoing basis, you will need to identify relevant quantitative metrics that drive value, are measurable, and ideally are good indicators of customer health/stickiness. For example, in the case of a CRM company, you may want to know your customers’ conversion rate of leads or opportunities in order to understand whether you might be able to help them become more effective with your marketing automation solutions. In the next steps, you’ll compare this data to benchmark data for a given customer and measure improvement. You can also compare these metrics to aggregates for “like” companies. As you identify target metrics, you’ll need to distinguish which ones are considered “usage” metrics that you can obtain directly from your SaaS application and which ones will require consent and participation from your customers to obtain.

Step 3: Benchmark Your Customers on Day 1

It’s important to understand the specific stage where each of your customers fit in the model/framework you’ve created, and it’s also important to get some baseline data on quantitative metrics as well. For larger, higher-touch customers, you should be able to understand this during a consultative sales process; however even with lower touch customers, you should be able to characterize/segment new customers based on system configuration, features purchased/implemented, and initial capture of the quantitative metrics you identified in Step 2 for that customer segment.

Step 4: Create an Improvement Plan

This step is critical and is a combination of art and science as it can be challenging to set targets at the right level. Your primary objectives should be to:

Set targets that are based on incrementally improving from the baseline you measured;

Encourage practices and usage of product features that will advance your customers along the Effectiveness Model you defined in Step 1;

Create a structure and context for the ongoing digital and interpersonal communications you will have with your customers.

Step 5: Provide Constant, Ongoing Feedback on Progress Against the Plan – And Revise as Necessary

Now that you’ve defined a framework, key metrics, and a plan for improvement against a baseline which you’ve captured, you can engage with your customers in a meaningful way that is focused around helping them get value from your product and become better at what they do. And you can measure their progress against defined objectives.

As a first step, you may want your CSMs to interpret system data and personalize recommendations to individual, high-value customers.

As you expand this offering to additional customers, you will need to define customer behavioral segments based on the metrics you’re capturing and provide those customer segments with extremely relevant digital content. For example, if you’ve identified a subset of your customers whose systems data indicate that they haven’t been using a key marketing automation feature of yours and that their conversion data hasn’t improved since their baseline, you can begin a drip marketing campaign to them on best practices in marketing automation and how to use your product to improve those metrics. That specific message should only go to that identified segment of customers, though, as you don’t want to “spam” your other customers with information that isn’t relevant to them. Your marketing team segments prospects based on behavioral data and delivers relevant content to them. You should target communications to your customers using similar logic. Great technology already exists to help you do this.

Helping customers improve and become better at what they do through their partnership with you is one of the greatest ways that you can demonstrate value. You don’t need to demonstrate it for all customers on Day 1. In fact, the sooner you can deliver it to some customers, the better. You can begin by implementing this model in a manual way with your most valuable customer segment, then roll it out to your broader customer base by segment – perhaps as you deploy additional Customer Success Automation and Marketing Automation tools. Hmmm… I bet a Customer Success Maturity/Effectiveness Model would fit in perfectly right about now…

Like this:

The funnel has been used for decades to model the journey a customer takes during the sales cycle. While it is still very effective as a forecasting tool, it falls short as an effective model of the overall customer journey, especially in the context of recurring revenue customers.

The cultivation process for identifying and processing new leads, then moving them through the steps to an initial commitment to your product is still best modeled by a funnel, and most of the common sales methodologies to date only support a funnel metaphor. I get it. Going though the qualification process and filtering a bunch of unqualified leads to qualified leads to qualified suspects and so on through the process is best illustrated and managed as if all these were going through a funnel with an expected conversion rate at each stage of x%, y%, and z%. In a world centered around new customer acquisition, this seems like a pretty good metaphor and it also helps provide forward visibility and predictability into new revenue for somewhat mature organizations; however when it comes to: A) capturing the journey once someone becomes a customer, especially one with multiple transactions; and B) predicting recurring revenue from an existing customer base, the funnel metaphor doesn’t work.

New Business is Only the Beginning

There is a strong tendency, even in the world of SaaS, to look at all revenue the same way. With any recurring revenue model, the focus needs to shift from a sales-centric perspective to a customer-centric perspective. Again, I’m not trying to minimize the importance of sales and new customers, or the predictability and management of that revenue stream. New customers and new revenue are vital to the growth and success of any organization. They just aren’t the end game of a sustainable recurring revenue business. They’re only the beginning.

So if the funnel isn’t the right metaphor for ongoing customers, what is? Some great minds have spent considerable time and effort on this problem and have come up with some good alternatives as a starting point.

Earlier this year Brian Solis wrote a blog post detailing a concept from his two most recent books about how the funnel no longer represents the customer journey, and especially from a digital marketer’s perspective, he isn’t alone. He cites work done by McKinsey four years ago based on research of 20,000 consumers identifying the customer decision journey as circular, with an outer loop representing “active exploration” and an inner “loyalty loop”. Both of these works, as well as Google’s Winning the Zero Moment of Truth highlight the recurring nature of the customer journey. They also key in on the important concept that the experience of your existing customer base will influence the purchase decisions of your future prospects. Brian Solis and The Altimeter Group’s model maps the following steps into a recurring elliptical path:

Awareness

Consideration

Evaluation

Purchase

Experience

Loyalty

Advocacy

The Funnel Has Revenue All Backwards

A funnel implies that significantly less revenue comes “out” of the funnel than entered the funnel in the form of leads – as shown in the image below. Again, this is a good assumption when managing and forecasting new business.

However, for an existing customer base in a healthy growing business with a good “land and expand” strategy and execution, the revenue that comes out of every cycle through the ellipse for the overall customer base should actually increases as a result of up-sells and cross-sells – as shown in the next figure.

Yes, some customers will (gulp) churn; however with a healthy business model and a good upsell/growth model and “land and expand” strategy, this net revenue should increase for your installed base of customers. Seth Godin, in his ebook Flipping the Funnel, as well as Joseph Jaffe, in his book Flip the Funnel, both discuss how you can use your existing customer base as advocates to market to additional prospects.

Are Rumors of the Funnel’s Death Greatly Exaggerated?

I don’t believe the funnel is dead. I think it still serves a purpose for predicting revenue and conversions, especially for new business. From a marketer’s perspective, however, and when trying to manage an existing customer base, the metaphor falls way short. The continuous elliptical path provides a much more realistic model for the customer journey and influence path. The next step is in applying metrics to the elliptical path in order to forecast recurring revenue so that it can be as effective as the funnel as a forecasting tool. Hmmm… I bet that would make a good topic for a blog post.

Like this:

If I had to channel my inner Jim Collins, I’d say: “A good company creates a product that enables customers to solve a business objective and automate a process. A great company creates a solution that actually empowers them to become better at what they do.”

Ongoing development of a solution is frequently shown as a continuous cycle. You develop, get feedback, improve, rinse, repeat. The focus of this blog post, is not so much on the iterative nature of the process, but on the role that the customer facing organization should play throughout that process in order to help empower customers to be better at what they do.

Listen

While this one may seem obvious, it all starts with listening. In the following three ways: 1) listening directly to your customers as they interact with your customer facing organization; 2) listening to what the data tells you about customer usage, challenges, and how they obtain value from your solution; and 3) listening to what customers might say to other parts of your organization, on your portal, or on social media.

Look for early indicators to understand which customers are at risk, which ones are thriving, and which ones should be doing more with and getting more value from your system, and look for patterns in the data. At a fundamental level, understand how you can enable your customers to better use your system. The bigger opportunity here, though, is to identify how and where you can empower your customers to become better at what they do when they use your solution. If you have more than a few hundred customers, the only way to really understand them is to look at and analyze data. Look at transactional, behavioral, online, usage and other data that should help paint a good picture of what your customers need from your product and your company. Too much data? Look at Avinash Kaushik’s “So What” test for some good ways to determine what’s useful and what isn’t.

Interact in a Relevant Manner

For the majority of your customers, think of this as a Marketing Automation opportunity where rather than moving prospects along the funnel towards a transaction, you’re moving your customers along a path to value. Based on what your listening has told you, determine the best messages to help your customers get value from your solution by: A) Providing answers that will help them be more effective with your product; B) Helping them become experts in the space by using content marketing. Give away expertise and best practices via white papers, case studies, and thought leadership; and C) On a case by case basis (or at a minimum, by segment) prescribing courses of action specific to those customers or segments that will help them be more effective with your solution based on their specific data. In the case of your largest customers, this may be a very direct 1:1 interchange. If so, great. Just make sure that you take the learnings from that direct interaction into the next phase…

Communicate Learnings Internally

It’s vital that your entire company is Customer-Centric. Fundamentally, you need value alignment around the customer, and you need good communication. Then once you begin to scale, you need to ensure you have good processes to ensure that all of your internal stakeholders are getting relevant feedback from your customer base through an established process at a regular interval (weekly may be a good frequency, but it’s really dependent on the specifics of your organization. In fact, you may want to increase this frequency when major events happen – new product release, acquisition, change in competitive environment…). Enlist management from other parts of the organization – Product, Marketing, Engineering, Finance, Sales – to help you define what *they* want to know about your customer base so that their organizations can better serve them… and most importantly, enlist your CEO in ensuring there is a sense of ownership of the customer experience across the entire organization and management team. Each of these organizations should own their aspect of the customer experience.

Improve Your Offering:

Now that you’ve enlisted the rest of the team and communicated customer pain points and opportunities, you can determine how best to proactively empower them and which parts of the organization need to step up to do so. This may include updating your knowledgebase or self service tools to provide more information, or it may include product improvements to make your solution more intuitive. It may result in building prescriptive capabilities into your product and guiding your customers programmatically along a particular path when certain conditions exist. Just remember that your “offering” isn’t just your product or your customer facing organization. In fact, an improvement in your offering might include a consulting services offering until you make improvements to your product, and the real solution might involve solutions from multiple departments.

Deploy Offering:

Now that you’ve made improvements to your offering based on listening to your customers, let them know you’ve made the changes, that you’ve listened, and most importantly, how those changes can empower them. Ideally, have multiple versions of your release announcement that focus on benefits for different customer segments, then send (or otherwise communicate) those different versions of the announcement to different customer segments. Your SMB segment might not care about multiple account administration or Single Sign On support, but they might be very interested in a simplified workflow.

An Example to Make the Concepts Real:

We’re almost there. To tie all these concepts together, I’ll offer the following example to close. I’ll use the hypothetical case of a technology solution in the digital marketing space:

Listen: In this phase, you discover a correlation between customer retention and the success (or lack thereof) of your customers’ marketing campaigns. Upon further investigation, you identify a segment of customers whose campaign metrics are laggards when compared to the rest of your customer base and industry standards.

Interact: In this phase, you reach out directly to that customer segment (via email and/or directly via your CSM team) to provide them with insights, best practices, and guidance around campaign best practices.

Communicate Internally: In a standing meeting with your Services, Product, and Marketing teams, you identify the issue and follow-up with areas of ownership where Services creates a new best practices and strategy offering; Marketing creates some new case-specific content on landing page optimization, content strategy, and segmentation; and Product puts new playbook-based features on the roadmap to guide users through the “storm” when their campaign metrics fall below a certain threshold.

Improve Offering: Services, Product, and Marketing all work on their respective offerings with periodic checkpoints back.

Deploy Offering: When each of these offerings becomes available, the CSM function should communicate their availability and how they will help make their customers more effective marketers. Those communications should primarily target the customer segment most in need (as identified in the Listen phase).

How is your Customer Success organization helping your company empower it’s customer base to be better at what they do?

Share this:

Like this:

Good Customer Success teams are analyzing data in order to understand the characteristics of their customers.

Great Customer Success teams are analyzing the right data in order to understand the characteristics of their customers.

Nowhere is analyzing the right data more critical than in understanding the early warning signs of at-risk customers. In generating awareness for this Thursday night’s CSM Forum Event: Detecting the At-Risk Customer Relationship, Mikael Blaisdell points out in his most recent blog post the one certainty behind at risk customers: “A customer that is not getting the desired level of measurable value out of their relationship with your company is one that is surely headed for the exit door.” I couldn’t agree more… or sooner.

In my last post, I indicated that the primary objective for a CSM organization should be to ensure that a customer is getting value from the implementation of your company’s solution. The CSM organization, whether highly personal, highly leveraged, or highly automated, needs to know which customers are at risk due to a lack of demonstrated value. Most organizations try to identify indicators of risk.

Generic Indicators: The Lowest Common Denominator

There’s one great thing about generic indicators of risk, such as system login/usage trends, support cases opened, and NPS values: Everyone can relate to them. There is almost always a correlation between one ore more of these factors and the level of churn risk associated with a customer, so everyone knows that they’re relevant. The problem with most of these indicators, however, is that they don’t always provide you with an early enough warning to allow you to take action that will save the customer, and in some cases, there isn’t even a cause/effect relationship between these criteria and churn. By the time most of this data is available, the customer knows they have a problem, and in some cases (like NPS) the customer has already gotten to the point of communicating it to you. In the case of usage metrics, I recently spoke with an executive who came from a financial services company. She told me they initially looked at usage data to determine which customers were at risk; however when they dug deeper and looked at the process that customers who defected went through, it was clear that by the time usage had declined, the customer had already run a month in parallel on a competitor’s solution and had already migrated off of theirs. Horse gone …no need to close the barn door.

Getting Beyond the Generic and Going Upstream

Really understanding whether a customer is getting measurable value from your solution requires that you look at indicators that are specific to you and to them. Think about your key selling points. Establish a Value Roadmap that you plan out with your customers and help them measure progress on a regular basis. This can be done with CSMs in a high touch environment or with system metrics and drip campaigns for low touch / high volume customer relationships. For example, if you offer a digital marketing solution, help your customers benchmark their existing conversion rates, then set goals and objectives for improvement and measure progress against those goals. If they aren’t achieving those objectives, then get out ahead of the problem. Do what you can to make them successful on your solution. Especially in the case of low-touch / high-volume deployment models (think B2C SaaS), great products will have relevant metrics reporting and prescriptive recommendations built in. Your offering shouldn’t just be about creating a technical solution to a problem, it should be about helping your customers get better at solving that problem with your offering. Keep in mind that your full “offering” includes product, services, and additional company interactions. Think about applying marketing automation principles for your installed base where the overt goal isn’t conversion, but successful use of your solution.

Also look at other data you have that might either indicate or result in a poor customer experience:

Have you had any recent system performance issues? If so, which customers were logged on at the time?

Have any of your key customers recently started following or connecting to your competitors on social media?

Are they not engaging with your drip customer marketing campaigns even though you’re sending them relevant content?

Are they not implementing the recommendations your team or the system has been providing on how to be more effective with your solution?

Are Generic Indicators Useless?

No. Absolutely not. And in many cases, they can still be useful as early warning indicators, especially in combination with other indicators. Every company, however, is going to need to take a good, hard, honest look at their own data to really understand which elements are early indicators – in their world – and which elements are simply correlated, but might be able to provide them insight on the trajectory of the customer relationship once they’ve been identified as “at risk” and a plan of action is put in place.

What early warning signs have you identified that are specific to your business and how have you used them to: 1) address the existing at-risk customers in the short term; and 2) and put a proactive plan of action into place to keep those issues from affecting other customers in the future?

Like this:

One of the most common organizational questions/challenges facing SaaS companies is figuring out which group has responsibility for up-sells and cross-sells. Is it CSMs or Sales? If Sales, is it the same sales team that does the hunting for new customers? If it’s some combination, where do the lines get drawn? Before getting into the framework for making this decision, though, I think it’s important to clarify the primary purpose of a CSM organization in a SaaS company: Ensuring customers are getting value from the SaaS offering.

Value: The Primary Role of the CSM

The framework I’m proposing makes the fundamental assumption that the primary objective of a CSM function should be to help a customer base achieve measurable value and results from a company’s product or service. Without that value-based foundation, any renewal, up-sell, or cross-sell attempt is an uphill battle. The objective of the CSM function should be first and foremost about creating and maintaining a value-based relationship across a set of customers, whether high-touch or low-touch. That foundation then breeds loyal customers, advocates, and additional revenue.

So… if the CSM role is fundamentally about the value relationship, how involved in the up-sell, cross-sell, and renewal transactions should they be?

The reality is that every organization has different characteristics and there is no one “silver bullet” organizational structure for Sales vs CSM responsibilities. One way to approach the question and determine what’s right for your company is to look at the key factors that determine how that responsibility is distributed across the following three potential groups or methods:

1) Web / Self Service

2) CSMs

3) Sales

Figure 1.

The Service Dimension: Complexity of the Customer Service Interaction

CSM involvement (and value) in the sales process will be greatly influenced by the amount of assistance/interaction your solution requires in order for your customer base to really get value. Is it completely self-service, self-installing, requiring zero human interaction or does it require significant assistance, mentoring, education and coaching by someone on your CSM team? While there is no absolute way of measuring degrees of complexity, you may want to ask yourself a few questions like: “Can my customers (or some segment of my customers) achieve value without the interaction of a CSM?”; or “Is my company’s product meant to be completely self-service without the need for any human interaction, or is there a heavy Services and consultative component required for my customer base to obtain real value from my product?” This line of questioning will give you an idea of how much value a CSM would provide in the upsell, cross-sell, or renewal opportunities. If a high-touch CSM relationship is necessary to help customers get value from your product, a similar interaction model is likely necessary in order to position the value of additional services or offerings.

The Sales Dimension: Complexity of the Transaction

Some solutions have a low-friction commercial aspect to them. Think online transactions. Low-volume, online purchases from a published price list clearly fall into that category. A small business user signing up for MailChimp, or an individual or workgroup signing up for DocuSign can be completely accomplished via web-based transactions with little (or no) human interaction required. Enterprise, high-volume, or non-standard pricing scenarios, however, will require interaction and likely negotiation with a sales rep.

While each of these dimensions is straightforward in and of itself, looking at your offerings across both dimensions can give you better insight into how to structure your organizations. Also note that this framework isn’t intended to apply to your entire company and/or product line. It can be applied to individual customer segments, markets, product lines or service categories.

The scenarios also tend to get more interesting when you look at high complexity service offerings which also have high complexity transactions. An example of this would be a high volume / enterprise agreement with a customer for a highly consultative solution offering or managed services provided in addition to the SaaS platform. Any modification to this kind of agreement will require custom pricing, negotiation, and a consultative sale involving an expert in the deal. In this scenario, Sales and CSMs might team together in a manner similar to Sales and SEs would for new business opportunities. This scenario is represented in the upper right hand corner of the charts.

The Third Dimension: Revenue

There is an obvious third dimension here, and that’s the ACV (or CLV) of a customer. In those cases, the quadrants would shift closer to the axes for high ACV/CLV customers as they would warrant a higher touch, while the quadrants would shift away from the axes for low ACV/CLV customers as they would warrant a lower touch (see figures 2 and 3 below, respectively).

Figure 2

Figure 3

So… while there is no single answer for assigning responsibility across the organization. This framework provides a way to help distribute responsibilities based on some key factors.

Which factors have you used in determining how to structure your organization’s up-sell and cross-sell responsibilities… and how have you addressed compensation and incentives in each model?

Share this:

Like this:

With all the Orwellian quotes from 1984 being tossed around as a result of PRISM, I thought I’d use one from his other book to describe the paradox of customer service for those of us who have ever supported a large and diverse B2B customer base. How do you provide a *great* experience for all of your customers in a scalable manner while creating something truly exceptional for your high value customers?

Well, first, you need to understand your customers – and while it’s actually not that uncommon for many startups in the SaaS space to have very good aggregate metrics such as CAC (Customer Acquisition Cost), Conversion Rates, etc., many companies don’t necessarily have individual customers very well segmented into logical groupings of actual and strategic value to the organization. It’s ugly, but it’s true, and it’s because a number of startups have gone through a growth process that looks something like this:

1) Invest in product and build it;

2) Invest in sales and grow the customer base;

3) Realize that the growing customer base is now large enough that it needs to be proactively managed and scramble like crazy to get the recurring revenue base under control.

Customer Segments

If you’re at this stage, getting things under control and categorized can actually be pretty straightforward. It just takes some thought, focus, and basic analysis. I’ve blogged about some of the technologies that are emerging in the space of revenue renewal management or Customer Success Automation. The reality, though, is that most SaaS companies, especially early stage ones, don’t yet have an analytics or Customer Success Automation solution to provide them with good insight into their customer base using real data-driven scoring and early warning systems across all customers. This post focuses on how to segment customers in the short term using basic data that you already have on your existing customer base (MRR, ACV, CLV, plus some other identifier for “strategic” accounts) …and it starts with the 80/20 rule.

The Top Tier: The “Most Equal”

While it may not be exactly 80/20, the reality is that in the vast majority of B2B SaaS companies, some small percentage of customers will represent a very large percentage of their revenue. Those customers are very high value and need to be treated as such. Create executive relationships and multiple touch points. Invest in them. Meet them face to face. Get to know them. Involve them in your business. Provide detailed monthly or quarterly business reviews that give them an indication of progress against stated objectives that you’ve worked out with them in advance. Determine the set of services you should be providing to this tier of customer and identify the amount of time it will take on an ongoing basis for your CSMs to provide those services to a model customer, then understand how many customers you can reasonably and consistently service given that time requirement… Congratulations, the laws of time and space just helped you create your first cut at your top customer segment.

Until you add more trained, senior, CSMs to your team or modify the level of service, you shouldn’t try to service more customers than you can at this level. If you over-commit, you risk missing on delivery expectations and you’ll leave your customers, er, less than satisfied. That may sound obvious, but getting from today’s reality to tomorrow’s desired state needs to be carefully managed. Next, determine how many customers you would like to see getting that level of service and either staff up your CSM team or pare back your service offering slightly (or some combination of both) in order for your needs and reality to align. Whatever number you come up with, you will need to justify it financially and take it into consideration when calculating your cost of services. A good initial target to shoot for if you’re a B2B SaaS company is to get 40% of your revenue into this bucket. In many cases it will be represented by fewer than 10% of your customers. Your mileage may vary, of course; however a reasonable range seems to be 1/3 to 1/2 of revenues represented by this customer tier for B2B SaaS companies.

The Second Tier: “The Most Leveraged”

While a high touch model works for that small percentage of customers who represent between 1/3 to 1/2 of your revenue, the law of diminishing returns takes over quickly and that model won’t scale to service the rest of your customer base. In this next tier, each CSM will handle significantly more customers (sometimes up to 10x more) than their “Top Tier” counterparts and they will need automation in order to be effective.

Try to identify useful data that you can extract from your systems, and automate its delivery to your customers via Customer Marketing and drip campaigns that are “signed” by the CSM. Compare that customer’s data against relevant benchmarks or aggregate data from the rest of your customer base. The more you can automate the heavy lifting and position your CSM as the expert who can provide some context, insight, and recommendations around the data presented, the more you’ll position your Customer Success Managers for success.

The Third Tier: “The Most Scalable”

Some percentage of customers, (in many companies this group might represent the majority of them) are not going to generate revenue sufficient enough to justify the cost of a high-touch relationship – especially with respect to proactive communication with customers. In order to support this tier of customers, a company needs to build out great self-service tools, including a self-service portal and an excellent customer marketing program… and they need to have a product offering for this tier that is intuitive and continuously improved as a result of customer feedback. Companies like MailChimp and ZenDesk are poster children in this space for what to do and how to do it. They provide great content. They also understand that many of their existing customers interact with their company primarily online, so they focus on creating a powerful, bonding, consistent online experience for their customers. Philosophically, they don’t see a “low touch” model as “low service”. They see it as a way to create a consistent, powerful, engaged relationship with their customer base – at scale. Understanding the importance of getting the product experience right, they also constantly listen to customer input, concerns, and challenges and respond by continuously making their product easier to use, more prescriptive, and less support-intensive.

While every company’s distribution of customers across these segments will vary with respect to percentage and number, and while your specific circumstances might require one more (or fewer) segment; understanding and segmenting your customers will help you focus on taking the right steps to provide the right level of service to each of them and create a great experience across all of them.

How have you segmented your customer base and what challenges have you faced in the process?

Share this:

Like this:

Although “Can’t innovate… my ass” may become the most quoted phrase of today’s Apple WWDC Keynote Address, the words that I thought were the most powerful were first in the opening video and repeated again in Tim Cook’s closing comments: “Whenever we design a new product, the first thing we ask is ‘what do we want people to feel?'”

That is the definition of Customer Experience, and it’s at the heart of what Apple does.

Customer Centricity needs to be exactly that: Centric …to everything. It needs to drive product design and all aspects of customer interaction, and it needs to be fueled by passion – passion that comes from the focus and examples that are set by leadership and spread throughout the organization with contagion.

Focus and Passion

Let’s face it, having 1) a kick-ass product that solves a real business problem and 2) a delightful customer experience in every interaction with your company (marketing, sales, support, customer success, services, finance) are the “New Normal”. Making a real difference, however requires a real passion for the customer – from the top down. It requires the entire company to be passionate about the product, the customer, and the experience that their company provides. In order for passion to ignite and spread, it needs to be aligned with a common vision, because everyone needs to be passionate about the same thing. The Apple WWDC Keynote presentation this morning was a great example of that common vision. The start of the presentation talked about focus and ended with the same focus. In Tim Cook’s closing words: “Our goal is to make amazing products that our customers love. Really great products that enrich customers lives. More than just words. They’re the values we live by. They drive us. ‘Designed by Apple in California’ – This is our signature, and it means everything.” The signature. It’s personal. It represents ownership. And Apple signs their products because they represent their customer-centric values.

Other Examples:

I’ll admit, I’m a self proclaimed Apple FanBoy, so I think it’s helpful to point out some additional examples where Focus and Passion come through in the product and customer experience:

Tesla: Elon Musk has been compared to Steve Jobs more than once. He is an incredible marketer and if entrepreneurs were rated on a scale of 1-10, he’d be a 20. I do not own a Tesla; however everyone that I know who does (and there are a number of them) loves the product, the company, and the experience. A Tesla isn’t just a car. It is a passion-driven, game changing, customer centric experience, and Tesla owners own the experience, not just the car – from sales/distribution to service, to “refueling”. I’ve seen, and continue to see unsolicited posts on social media from owners endorsing the product. (Real “Promoters” in Customer Experience parlance)

Virgin America: Another example of a company taking an industry and creating a differentiated offering – focused on the Customer Experience. After almost 3 million miles, I can personally attest to the fact that the air travel experience in general, for the most part, well, sucks. The Virgin Group has taken a different, better, customer centric approach and made improved it. Emotionally. Really. It makes people feel better about air travel. So much so, that they promote the brand. Multiple friends and colleagues of mine have posted unsolicited kudos about Virgin on social media. I have yet to see someone I know do that for another airline. Richard Branson, another great entrepreneur created the Virgin experience and helped rally the internal organization around the focal point of improving the experience of air travel, and truly offering something different. That everyone was passionate about.

So as you think about these customer experiences… and your own, ask yourself “What do *you* want people to feel?”

Share this:

Like this:

Based on personal experience and extensive conversations with leaders and investors in SaaS companies, subscription customers tend to fall on a distribution curve with respect to their relative happiness/success and their revenue potential. A large group of customers are in an area where they may not represent an immediate incremental revenue opportunity; however, at either end of the distribution curve lie customers that need particular attention and focus because they have the opportunity to impact revenue either positively or negatively.

Figure 1: Customer Distribution

At Risk Customers:

At one end (Area “A” on the curve above) are customers who represent a churn risk and will negatively impact your revenue if their issues are not addressed. In a SaaS world, it is important that you understand who these customers are, why they’re at risk of churn, and what you can do about it as quickly as possible. The earlier these customers are identified, the sooner your organization can take action to 1) address their specific needs; and 2) understand and address the root cause of the issue and proactively address it for the rest of your customer base.

Advocates or Upsell Opportunities:

At the other end of the curve (Area “B”) are customers who either 1) represent a direct upsell opportunity; or 2) can become influencers or advocates to help you land and convert new customers. Engaging appropriately with these customers and potentially introducing them to other parts of your organization (sales, services, marketing) should happen in as timely a manner as possible in order to ride the momentum of their current experience.

Data and Analytics:

Identifying customers at either tail of the curve and working closely with them to optimize revenue is hard to do well by “feel”, especially at scale. With a small number of high value customers and multiple relationship touch points, you can keep a fairly tight pulse on their health; however it is extremely difficult to get any kind of early warning signals or early success indicators without some degree of automation or Customer Intelligence solution that uses data and analytics to identify these characteristics.

A number of technologies are emerging in the Customer Success Automation / Customer Intelligence / Recurring Revenue Optimization space. In fact there are almost as many names for this emerging space as there are companies in it, and those companies’ websites all contain great information on their philosophy and differentiators. Gainsight, Totango, and Scout Analytics all focus on identifying customers at the tails of the curve using your internal data (from your SaaS solution and/or your CRM data) while companies like InsideView help you understand external factors at your customers’ organizations (M&A, announcements, key personnel changes, and other activity) that can impact their need/want for and perceived value in your product. Companies continue to emerge in this space and some analytics-based companies, such as KissMetrics, are providing Customer Success stories of how SaaS companies are using web/behavior data to optimize subscription revenue and reduce churn.

Two Courses of Action:

Now, what you do with this information is up to you, and while the short-term reactive course of action is to take appropriate steps with the customers identified as the ones in the tails of the curve; the long-term, proactive course of action is to use this actionable data to drive the experience, management and behavior of your entire customer base so that you shift the entire bell curve to the right. This leads to a significantly smaller distribution of “At Risk” customers in Area A and the larger distribution of successful customers in Area B.

Figure 2: Moving the Entire Distribution of Customers to the Right

One key way to move the entire curve is to take appropriate actions based on customer behavior data. A timely, recent HBR blog post entitled: CMOs: Build Digital Relationships or Die urges CMOs to take advantage of the customer data that is available to them and build an ongoing, digital relationship with those customers. I also cover the need to build that marketing relationship in a recent blog post.

Please share your thoughts, opinions, and experiences regarding this model and the birth/evolution of this space.

Share this:

Like this:

I’ve been jotting down notes on this blog post over the weekend, wondering how “front of mind” this topic is, then I saw David Edelman’s blog post on LinkedIn this morning about his presentation at SAP’s Sapphire Conference and thought: Good. Someone else is thinking about this… in a similar way… and it’s important.

Conventional Wisdom:

Most, if not all, companies with a Marketing function focus their efforts (and metrics) on activities that drive net new customers. These metrics generally include new leads, qualified leads, analytics on web traffic/behavior, conversions, etc. Over time, a number of organizations have gotten better at focusing less on “vanity metrics” and paying more attention to the ones that really drive sales; nonetheless, the primary focus of the marketing department’s effectiveness, and value to the organization, has been related almost exclusively to its impact on the company’s ability to acquire new customers.

One Level Deeper:

Now don’t get me wrong, I’m a huge advocate of top line growth and customer acquisition; however top line growth doesn’t just happen by bringing on new customer logos. Most companies have a huge revenue growth opportunity in their existing customer base, and fundamentally, in a SaaS world, where value needs to be proven continuously, the initial acquisition of a customer is not the end of the Customer Journey, it is merely one of many Moments of Truth to come in a much longer customer journey and relationship. Once a customer is “on board”, organizations must now focus on ensuring that customer is getting value from the solution. Paying attention to the data a SaaS solution can provide helps you understand what’s happening – on a customer-specific basis. Effectively automating your communication, and nurturing your customers, not just your leads, through something that looks a lot like Marketing Automation, creates many 1-1 dialogs …that scale …that are relevant …that create loyal customer relationships …that build brand advocates …that generate more revenue.

Freemium to Paid: The Transition Begins

The freemium model has made the need for customer marketing clear for a number of “consumerprise” companies. In many ways, converting a free customer to a paid customer is very similar to “up selling” a paid customer to a higher level of service. A customer will go from one level of financial and emotional commitment to a higher one. In order to get there, customers need to see value. Conceptually this isn’t very different from the old enterprise sales model where a company would “pilot” a solution for little or no cost, then once they were able to prove value, the license sale would occur. In the world of SaaS, however, this needs to be a highly repeatable, highly automated, highly scalable process, and has the opportunity to occur many times during the life of a customer. Freemium SaaS companies get this, and the good ones are doing an excellent job understanding usage and behavior data from their free customers, and applying automation to nurture/market to them effectively (relevant in a 1-1 kind of way) and drive conversions. The great ones are also using that data to constantly improve their product and make the customers’ product experience consistently better.

Connecting with Customers:

The fundamental objective behind customer marketing should be to create a connected experience. Customer Experience is made up of two key components: 1) the experience a customer has with your product/service; and 2) the experience a customer has with your company via other interactions – online, in-person, on the phone. The data and technology exist to create a connected experience with your customers and communicate value in a personal, targeted, yet scalable way. I’ll cover those topics in a future post.

Like this:

Yesterday was the first annual “Pulse” Conference, sponsored by Gainsight to generate awareness for the Customer Success space. The team put on an impressive first year event that attracted around 300 attendees and included engaging, high-profile speakers with relevant content. Gainsight plays in a growing space of solutions around Customer Success Automation (that’s my term, not the industry’s… yet). I’ll talk a bit more about the space and the other players in a future post as it is a very interesting space with some great technology solutions. This post is about the highlights of the conference:

The “Three R’s”

Nick Mehta, Gainsight CEO opened by introducing some key fundamental objectives of Customer Succes – and they’re all measurable. I’ve referred to them as the “Three R’s”: Retention, Renewals, and References.

Geoffrey Moore and the “Four Gear Framework”

Geoffrey Moore, Author of “Crossing the Chasm” and “Inside the Tornado”, presented an alternative framework to the traditional Technology Adoption Lifecycle, explaining that some consumer-focused businesses never faced a chasm to cross, but rather drove their growth through the “Four Gears” of Acquisition, Monetization, Engagement, and Enlistment – presenting a good case that a company’s growth is constrained by the slowest gear and that a strong Customer Success focus can help “Power gear” of Enlistment move more quickly. I’ve been a huge fan of Geoffrey Moore since the days of “Crossing the Chasm” and thought his observation and insight were spot-on. His message was so relevant, that not even a full-blown test of the fire alarm system at the Four Seasons in SF was able to detract from it. He kept the audience engaged.

The “Safe-Switch” Process

Bill Binch from Marketo shared that one of the key risk indicators for customer health they observed was employee churn on the customer side. I’m sure anyone who has managed a customer relationship can attest that changes in a customer’s key users or sponsors can sometimes jeopardize the status of an incumbent technology solution (especially if the solution has low switching costs) in a pay-as-you-go model. The CSM team there would offer free “re-training” for the customer’s new team members to reduce any re-adoption obstacles.

Track the profitability of your renewal stream.

Bruce Felt, former CFO at SuccessFactors shared some of the economics of renewals. SuccessFactors had a great valuation when it was acquired by SAP: $3.2 Billion. Interestingly enough, their acquisition costs for a customer where astronomical. Significantly higher than the first year’s Annual Recurring Revenue. When they tracked the profitability of the renewal stream, however, they calculated roughly 70% operating margins on their renewal stream. In his words: “You don’t have a business model if your customers don’t renew.”

Renewals are a trailing indicator of customer health

A number of speakers made the point (and I strongly agree), that basically renewal rates measure the score at the end of the game. They aren’t a timely actionable metric that can be used to impact individual customers. I’d argue that usage is also a trailing indicator of poor health – it may be useful in determining upsell opportunities for some variable usage products/services, but if a customer’s usage has gone down, in many cases, it’s because they’ve already moved on to a competitor’s solution. It’s vital for every company to identify the *leading* indicators of customer health for their solution and watch those closely.

Apply leading indicators of customer health in the sales process

Fantastic insight from Catherine Blackmore at Badgeville, where they identify leading health indicators for existing customers and run their sales prospects through those filters to determine whether the prospect is at risk of being a successful customer. If so, they act early to identify any required services and expectation management up front to ensure the customer will be successful before they’re brought on board. Otherwise, they won’t sign the customer. Now that’s a culture focused on success.

Retention and Valuation

Roger Lee from Battery Ventures, Ping Lee from Accel, Byron Deeter from Bessemer, and Aref Hillaly from Sequoia all sat on a panel together to provide the investor perspective on recurring revenue. Some key points:

Best-in-class companies churn fewer than 5% of their accounts per year

Churn is a compounding factor in revenue growth (obvious, but worth noting as it really impacts the math… see next bullet point)

Some investors estimate that for every 2% improvement in churn a company will see a 20% bump in valuation.

Currently 15% of the total software market is SaaS and 85% is enterprise software. Some members of the panel expected those percentages to invert in the next 10 years.

Who is more valuable to an organization?

At the end of the day (literally, not figuratively), a panel of CEOs, consisting of Chris Cabrera from Xactly, Aaron Levie from Box, Tien Tzuo from Zuora, and Nick Mehta from Gainsight gave the CEOs’ perspective on Customer Success. When fielding a loaded audience question of “when will Customer Success become more important than sales?”, the group tactfully raised a good point. Namely, that many parts of an organization are necessary and equally key to success. More importantly, however, is that in the absence of implementation/switching costs, in the world of pay-as-you-go SaaS, sales becomes easier (still not “easy”) and retention becomes more difficult.

A long inaugural blog post, but hard to make it any shorter given the great content at the conference. Job well done!